Justin Bloesch, Harvard University

"Which workers earn more at productive firms? The Role of complementarities and Position Specificity"

Abstract

This paper develops a theory of production complementarities and position specific skills to explain heterogeneous firm productivity-wage premia and wage dispersion across occupations. Workers are "specific" to a position if (i) positions are differentiated in their task content (ii) position outputs are complementary in production, and (iii) it is time consuming for the firm to replace a specific worker, incentivizing productive firms to pay higher wages in a model with turnover and imperfect contracts. Productivity wage premia arise due to complementarities rather than extensive margin labor supply elasticities, implying that steady-state premia depend on firm average labor productivity but not firm size. In Danish data, we estimate the effect of worker deaths on firm value added and profit by occupation groups, and we estimate wage premia via passthrough of productivity shocks, which support the main predictions of the model. We discuss implications for the effect of superstar firms on wage inequality, the college wage premium, and the gender wage gap.

Contact person: Birthe Larsen